Nautilus Revenues Down Again in Q3

VANCOUVER, WA -- Nautilus Inc. has strong indications of interest from potential buyers of its discontinued commercial gym equipment operation and hopes to sell one or more pieces of that business segment in the near future, Edward Bramson, chairman and CEO, said on Monday in an earnings call with investors.

Based on what’s left on Nautilus’ books as direct assets of the commercial business, proceeds of the sale were estimated at $10.5 million. Kenneth Fish, Nautilus CFO, also indicated that the company is not looking to transfer all areas related to the business to the new buyer, such as accounts receivable, which he said the company would continue to collect upon until it sells off areas of the commercial business.

The company reported a third quarter loss in revenues for its discontinued commercial business of $22.9 million, or $0.75 per diluted share, for the quarter ended Sept. 30, 2009. That was compared to a $11.9 million loss in the third quarter of 2008, or $0.39 per diluted share.

Net loss from continuing and discontinued operations in the third quarter 2009 was $24.4 million, or $0.80 per diluted share, compared with a net loss of $34.1 million, or $1.11 per diluted share, in third quarter 2008.

Nautilus reported a loss from continuing operations of $1.5 million, or $0.05 per diluted share, for third quarter 2009, versus a loss of $22.2 million, or $0.72 per diluted share, in third quarter 2008.

Net sales from continuing operations also were down at $41.4 million in the third quarter, compared to net sales from continuing operations of $62.7 million for the same quarter in 2008. However, Nautilus officials said they offset expected lower sales in the retail and direct businesses with greater operating efficiencies, resulting in profitable operating income for both businesses in the third quarter.

“While our top line results continue to reflect the challenging consumer spending environment, we are encouraged by the progress we are making towards restoring our continuing operations to profitability,” Bramson said. “For the second consecutive quarter, we achieved positive operating income for both our retail and direct businesses, reflecting our success in aligning our cost structure with revenue trends.”

As the company moves its focus toward direct and retail channels, Bramson said it hopes to see sales growth next year with the introduction of a Nautilus-branded Mobia low-impact cardio machine.

“As we announced in September, we made the decision to divest our commercial business assets in order to enable our team to invest all of our resources on our branded consumer businesses,” Bramson said. “While Nautilus Commercial has many attractive assets, we believe we will benefit from greater operating efficiencies by focusing exclusively on our direct and retail channels. In the fourth quarter, we plan to launch a major new product, the Nautilus-branded Mobia low-impact cardio machine. We are hopeful that this and other new product programs will generate profitable sales growth in 2010.”